Impasse Ends With Promise To Protect Spending

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A political impasse that shut down most federal operations for four days ended last week with a new stopgap spending bill and a promise to protect education spending as the White House and congressional leaders negotiate a seven-year balanced-budget plan.

The so-called continuing resolution, which President Clinton signed Nov. 21, authorizes spending through Dec. 15 for agencies, including the Department of Education, whose fiscal 1996 appropriations have not been approved.

The measure also contains language that commits Mr. Clinton to work with Congress toward passing legislation this year that would erase the federal budget deficit by 2002. Negotiations were scheduled to begin this week.

If a long-term agreement is not reached by Dec. 15, another continuing resolution would be needed to authorize funding for agencies whose budgets were still outstanding.

While both Democrats and Republicans rushed to congratulate themselves on last week's agreement, final gains on both sides may be more political than fiscal.

"I think the agreement is being overblown. Nothing about it is binding," said Dean Stansel, the fiscal-policy analyst for the Cato Institute, a libertarian think tank here. "They framed it in a way so both could declare victory and walk away for a few weeks."

Republicans say the agreement favors them because President Clinton has accepted their policy cornerstone, a commitment to downsize the government and erase the deficit in seven years.

"What I can tell you is that House and Senate Republicans have an absolute moral commitment to the American people to keep our word," Speaker of the House Newt Gingrich, R-Ga., said in a speech to the U.S. Chamber of Commerce last week.

Mr. Clinton also declared victory, noting that the law promises a balanced-budget plan that provides "adequate" funding for education and other social programs.

"This agreement reflects my principles," Mr. Clinton told reporters. "And for the first time, the Republican leaders in Congress have acknowledged the importance of those principles."

Crisis Averted

However, the agreement does not define "adequate." Mr. Clinton's starting point for negotiations will be his 1996 budget plan, which would increase discretionary education spending by $838 million, or 4 percent over current levels, administration officials said.

The appropriations bill approved by the House would trim the Department of Education's discretionary spending by $3.5 billion for the fiscal year that began Oct. 1, while a plan pending in the Senate would cut about $2 billion.

Political rhetoric aside, the shutdown's end was a relief to state agencies and school districts that had been unable to draw on federal education funds since Nov. 14, when some 4,400 of the Education Department's 5,000 workers were sent home. (See Education Week, Nov. 22, 1995.)

"Everything seems to be under control," Undersecretary of Education Marshall S. Smith said early last week. "The crisis that would have hurt the school system was two or three days away."

But the department faced criticism for not designating employees who handle funds transfers as "essential workers" to keep them on the job, especially since other agencies retained similar personnel.

"To not have those monies flow to the states is not a good business decision," said John T. MacDonald, the director of the state-leadership center for the Council of Chief State School Officers, who served as assistant secretary of education under the Bush administration.

Mr. Smith said the department followed a governmentwide policy.

A Long Road

While the wheels of government were turning again last week, the negotiators will face a huge task in bridging the policy gap between the White House and Capitol Hill.

In his Chamber of Commerce speech, Mr. Gingrich said there were several acceptable ways to find more money for programs favored by Mr. Clinton. A Republican aide suggested that some money might be shifted from the Department of Defense, which would receive more than it requested under pending appropriations bills.

"Clearly, a set of macro-decisions will drive the micro-decisions," said one Democratic aide.

But the negotiators will be discussing not only the 1996 budget but also a long-term fiscal blueprint and other big policy changes congressional Republicans have tied to their budget legislation.

Most of them are included in the proposed Balanced Budget Act, a "budget reconciliation" bill that would make changes in entitlement programs in order to help balance the budget, including reduced school-meals subsidies.

Citing low spending levels in welfare and education programs, Mr. Clinton has pledged to veto the bill, which passed the Senate 52-47 on Nov. 17 and was approved by the House last week on a vote of 235-192.

Schools Eye Medicaid

The bill also carries the GOP's prized $245 billion in tax cuts, a level Mr. Clinton has said is too high when social spending is being reduced. The president has offered a smaller tax-cut plan.

The administration is also sure to oppose a provision that would limit the direct-lending program to 10 percent of new student-loan volume, compared with the current level of about 35 percent. That cap would send millions of new loans back to the private, federally guaranteed loan market.

"We want open competition and let the better man win," said Jeremy Ben-Ami, a deputy assistant to the president for domestic policy.

Education lobbyists also hope that the pending negotiations will amend the section of the reconciliation bill that would turn the Medicaid health-insurance program for the poor over to the states in the form of block grants. While it would guarantee coverage for pregnant women and children under 13, education groups fear that schools would lose access to Medicaid money that many now use to pay for health services and special education.

The American Association of School Administrators thought it had secured a commitment from Sen. Nancy Landon Kassebaum, R-Kan., to push for language ensuring that schools could continue to apply for Medicaid reimbursement. But an AASA official said she backed off because she had been told it was not necessary.

"There's just too much at stake for local schools not to pursue this," said Nicholas Penning, a policy specialist for the AASA.

Welfare Changes

A package of sweeping welfare reforms, which would remove the guarantee of coverage for eligible families, is also on the table.

Before passing the reconciliation bill, the Senate stripped several welfare provisions under a rule that forbids inclusion of provisions that do not reduce spending.

Language that would allow states to bar cash payments to unwed teenage mothers was struck under this rule, as well as a provision that would bar additional benefits to women who have more children while on welfare.

Republican leaders plan to include the jettisoned provisions in a free-standing welfare bill.

It was unclear how lawmakers would proceed in moving the separate bills. A framework for their talks with the White House was not expected to be nailed down until early this week.

Vol. 15, Issue 13

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